2021 (2) TMI 615 - HC - Income Tax

Gujarat HC Dismisses Tax Appeal on Income Tax Act Interpretation

The Gujarat High Court dismissed the Tax Appeal brought by the Revenue concerning the interpretation of Sections 40(a)(ia) and 41(1) of the Income Tax ... Addition u/s 40(a)(ia) - Non deduction of TDS on processing charges - Whether the Appellate Tribunal was right upholding the order of the CIT(A) allowing relief from disallowance ignoring the fact that the assessee did not establish genuineness of the expenditure claimed to have been paid to M/s. Cham Trading Organization and not making TDS against the payment made for this expenditure and hence, required to be disallowed as per the provisions of section 40(a)(ia) of the Act? - Disallowance of Terminal Handling Charges - Charges were paid to resident transport operators / labour contractors without making TDS against the payment of this expenditure and - CIT-A allowed relief to assessee - Addition u/s 41(1) - cessation of outstanding liabilities - assessee failed to furnish even confirmation from claimed creditors - CIT-A allowed relief to assessee - HELD THAT:- As gone through the order passed by the CIT (Appeals) and the order passed by the Appellate Tribunal. In our opinion, none of the three questions referred to above, as proposed by the Revenue, could be termed as substantial questions of law. All the three questions involve factual aspects, which have been dealt with by both the authorities. i.e. the CIT(Appeals) as well as the Tribunal. Revenue appeal dismissed. Issues:1. Interpretation of Section 40(a)(ia) of the Income Tax Act, 1961 regarding disallowance of processing charges.2. Interpretation of Section 40(a)(ia) of the Income Tax Act, 1961 regarding disallowance of Terminal Handling Charges.3. Application of Section 41(1) of the Income Tax Act, 1961 in respect of cessation of outstanding liabilities.Issue 1: Interpretation of Section 40(a)(ia) - Processing ChargesThe Revenue challenged the order of the Appellate Tribunal regarding the disallowance of processing charges under Section 40(a)(ia) of the Act. The Tribunal had allowed relief from disallowance of processing charges, arguing that the assessee did not establish the genuineness of the expenditure paid to a specific organization and did not make TDS against the payment. The High Court, after hearing arguments and reviewing the orders of the authorities, concluded that the questions raised by the Revenue were not substantial questions of law. The Court emphasized that all three questions involved factual aspects already considered by the authorities, and thus, the Tax Appeal was dismissed.Issue 2: Interpretation of Section 40(a)(ia) - Terminal Handling ChargesThe Revenue also contested the Tribunal's decision on the disallowance of Terminal Handling Charges under Section 40(a)(ia) of the Act. The Tribunal had upheld the relief from disallowance, stating that the charges were paid to resident transport operators without TDS. The Revenue argued that TDS should have been made, leading to disallowance under the Act. However, the High Court reiterated that the questions raised were not substantial questions of law as they pertained to factual considerations already addressed by the lower authorities. Consequently, the Tax Appeal was dismissed.Issue 3: Application of Section 41(1) - Cessation of Outstanding LiabilitiesRegarding the addition made under Section 41(1) of the Act concerning the cessation of outstanding liabilities, the Revenue challenged the order of the Appellate Tribunal. The Tribunal had allowed relief from the addition, noting the absence of claims for recovery and the lack of obligation on the assessee's part to return the money to creditors. The High Court concurred with the lower authorities, stating that the questions raised were not substantial questions of law but rather involved factual aspects already considered. Consequently, the Tax Appeal failed, and the Court dismissed it.This judgment by the Gujarat High Court addressed various issues related to the interpretation and application of provisions under the Income Tax Act, 1961. The Court emphasized the distinction between questions of law and factual aspects, ultimately dismissing the Tax Appeal brought by the Revenue due to the absence of substantial legal questions.